At the end of its two-day meeting in Abuja on Tuesday, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) retained the Monetary Policy Rate at 11.5 percent and also left other monetary policy parameters unchanged as part of its efforts to sustain the nation’s economic recovery in the months ahead.
Briefing the media on the key decisions taken during the meeting held in Abuja, the CBN Governor, Godwin Emefiele, said the committee members also agreed that the Cash Reserve Ratio and Liquidity Ratio at 27.5 percent and 30 percent respectively should be sustained.
He expatiated: “After a careful balancing of the benefits and the downside risks of the policy options, the MPC decided to hold all parameters constant, believing that a whole stance will enable the continuous permeation of current policy measures in supporting the recorded growth recovery and further boost production and productivity which will ultimately rein in inflation in the short to medium term.
“The MPC thus decided by a unanimous vote, the MPC voted as follows, one, retain MPR at 11.5 per cent; retain the asymmetric corridor of +100/-700 basis points around the MPR; retain the CRR at 27.5 per cent; and retain the Liquidity Ratio at 30 per cent”, Emefiele added.
The monetary policy expert pointed out that the growth in the domestic economy was strong in 2021 and projected that the momentum would be sustained in 2022, especially based on the improvements recorded in the Q3 Gross Domestic Product (GDP) and a positive outlook for the last quarter of the year
However, Emefiele cautioned that the rising inflationary pressure and gradual withdrawal of monetary and fiscal stimulus could dampen the recovery expected in 2022, adding that growth in emerging markets is expected to slow in 2022 due to a low level of vaccination and limited policy support.
The CBN Governor partly attributed the high inflation rate in the economy to exchange rate pressures and supply bottlenecks associated with COVID-19 restrictions.
He said: “In price development, the MPC observed that inflation in most advanced economies would remain high and unlikely to abate in the short to medium term.
“This is driven by the persistence of supply side disruptions and pent-up demand associated with recovery from the virus. In emerging markets and developing economies, inflation has also remained high due to a combination of persisting exchange rate pressures and supply bottlenecks associated with lock down restrictions”, the CBN Governor stressed.
He said the MPC projected that Nigeria’s economy would remain on the path of positive growth given its impressive performance in Q3 2021 and sustained rebound in economic activities.
Specifically, Emefiele explained that the MPC noted the significant improvement in the Manufacturing Purchasing Managers Index (PMI), which rose to 52.0 index points in December 2021, compared with 50.8 index points in November 2021, reflecting a continuing economic recovery driven by increasing business activities in the economy which improved employment and production levels.
